Medical firm holds strong against the hostile Goliath across Atlantic

AS A triathlete, Ian Gilham is no stranger to a tough contest. The chief executive of Axis-Shield has cycled, run and swum for Great Britain at over-50s’ triathlons in Australia, Hungary and Ireland – but it is his day job that is currently turning into an endurance event.

In June, New York-listed life sciences giant Alere made an informal approach for the Dundee-based medical testing kit maker, touting a £230 million offer price.

Axis-Shield’s board unanimously rejected the approach, but shares in the Scottish firm jumped nearly 50 per cent in July to hit a ten-year high above 500p, soaring past Alere’s 460p approach, after the Massacheusetts-based firm went public in an attempt to bring the board to the negotiating table.

When no talks were forthcoming, Alere went hostile with its bid at the start of this month, taking its all-cash offer direct to shareholders.

But despite the biotechnology pair limbering up for a mammoth takeover battle, the boss says Axis-Shield hasn’t taken its eye off the ball.

“It’s business as usual for us,” says Gilham. “One of the dangers when you’re in a bid situation is that people can become distracted from projects. But there’s no excuse for missing targets or deadlines, so part of my job is to keep our expansion on track.”

Gilham points to last week’s interim results, which showed a 57.4 per cent jump in underlying profits to £4.3m on the back of a 42.9 per cent rise in revenues from its key Afinion machine.

Afinion lies at the heart of the take- over battle with Alere; the equipment can run several tests on the same sample and has made Axis-Shield, in the words of chairman and Scottish life sciences veteran John Brown, “a world leader in diabetes testing”.

Gilham’s focus on meeting deadlines means the company is still on course to launch a new lipids test – one of the indicators of heart and lung disease – on Afinion in Europe before the end of this year and shoot for regulatory approval in the United States.

Launching the lipid test will put Axis-Shield squarely in competition with Alere in the doctor’s surgery, with both companies making testing kits that can be used in clinics rather than having samples sent off to a laboratory.

Alere is a giant in the life sciences world, with annual revenues of more than $2 billion (£1.2bn) a year, compared with about $100m for Axis-Shield. The American company is a known quantity in Scotland: under its previous name, Inverness Medical, it built up its Lifescan business in the Highland capital before selling it to Johnson & Johnson in 2001 for $1.3bn.

The US group currently has about 200 staff in the UK operating from seven sites, including Dundee and Stirling.

David and Goliath struggles should hold no fears for Gilham though – as a Wolverhampton Wanderers fan, he has watched his team sink down through the English football divisions before a rejuvenated side found its form and returned to the top flight.

“I watched Wolves beat Fulham 2-0 – it’s the best start to the season I can remember,” says Wolverhampton-born Gilham, 51, who has been a season-ticket holder since the age of seven and still manages to see about half of the club’s home games.

Slipping on a Wolves scarf is subject to Gilham’s travelling commitments, with his job as chief executive taking him around the world. While he normally bases himself at Axis-Shield’s office near Heathrow, the boss also travels to the company’s headquarters in Dundee and its operations in Germany, Norway and Switzerland.

The firm’s American expansion has also taken Gilham to his US office in Boston, while the push into emerging markets has seen him spend “a lot of time” in China, opening the company’s office in Shanghai. Axis-Shield – which was created in 1999 through the merger of Dundee University spin-out Shield Diagnostics and Norway’s Axis Group – recently appointed its first member of staff in India as it prepares for a push into the subcontinent.

Such moves into emerging markets are a key part of the company’s defence against Alere’s takeover bid. Type 2 diabetes is on the rise in both China and India, with Axis-Shield’s tests for the disease running on its cheaper Nycocard platform, which it is promoting in Asia and the Far East.

Gilham joined Axis-Shield in 2001 as group managing director from drugs giant GlaxoSmithKline, where he had helped with the integration of Glaxo- Wellcome and SmithKline Beecham following the merger in 2000.

“It was mergers and acquisitions on a much bigger scale,” he admits, although he adds that he has a strong board around him to help him steer the company through the current takeover bid.

That board includes Brown – who is joint chairman of the Life Sciences Advisory Board, which brings together industry and government to grow the sector in Scotland – and corporate financier Bay Green, who is vice-chairman of Dresdner Kleinwort and who has brought City expertise to bear on the Alere approach.

Brown brought strong words to bear last week when Axis unveiled its defence document to shield itself from its American suitor. Although all of the points had been rehearsed by the board following the initial approach and during the interim results, Brown branded the bid as “opportunistic and wholly inadequate” and told shareholders Alere was trying to buy their company on the cheap.

But Alere maintains its all-cash bid offers shareholders the certainty of a return on their investment. Gilham argues that Axis-Shield is starting to reap the rewards of its investment in Afinion – recommending a maiden dividend of 1p a share in its past financial year – and that its lipids test will take it into a market expected to be worth about $500m by 2013, bigger than its existing largest market, diabetes, at $350m.

As well as representing his country in triathlons, Gilham has played badminton at senior county level and is a qualified rugby coach. That experience with tackles and scrums could come in handy as the takeover tussle continues.